A Guide to Help Your Start-up Get Funding
“If you can’t explain it to a six year old, you don’t understand it yourself”
– Albert Einsten
Let’s begin with this amazing statement.
It summarizes the concept of simplification and understanding at its best. It teaches us to keep things raw and uncomplicated. As they’re always easy to grasp and hence digest. Think of it as a child’s play.
I think this is that statement which gave us the famous KISS. No no please don’t get distracted. I’m not talking about anything which you’re thinking in your mind. Instead, it’s the most popular formula.
I think it’s pretty nice. What do you think? Hey, I was talking about formula and not about that lipstick mark.
Let’s relate it with Business context.
You have a Start-up Idea which you believe is quite profitable. But when you explain it to your friends and family they aren’t able to understand it. Not because it’s complicated but because of your poor explanation. The apparent reason of you weren’t able to make them understand is, you don’t understand your plan yourself. I know it’s not true but this is how it looks.
Now assume you’re yearning for the funds to start your Start-up with that extra-ordinary plan. Apparently, you meet an investor and convince him/her to listen to your plan. And, guess what. The Investor couldn’t understand the plan as well which resulted in zero investment for your Start-up. You have missed this golden opportunity of obtaining funds to turn your idea into reality.
That’s the reason why you need to go through this guide. You can’t afford to fail in that one in a lifetime opportunity. An opportunity where you can transform all your Start-up dreams into reality. You need to be well prepared and I’m here with this guide to support you.
Few Important Terms You Need To Know
Before diving into the world of Start-ups, Investors and Funding, let’s get aware of a few very important terms. These terms will not only help you in understanding this guide but also the Business World. It’ll nurture a different perspective inside you in consideration of Business and Entrepreneurship.
So, let’s go.
1. Entrepreneur and Entrepreneurship
Don’t get shocked. I bet you don’t know the actual meaning of them. And it’s not your fault. The dictionary says that anybody who runs a business with a financial risk is an Entrepreneur. But it’s not. You know what a dictionary tells less than 10 percent about Entrepreneur and Entrepreneurship.
The truth is this. Entrepreneurs are people who perceive an unsolved problem of society. They then start solving it and end generating a business out of it. Hence, whatever they do is nothing but Entrepreneurship.
2. Start-Up
There is something which I want to tell you about the Start-up. Some of us think of Start-up as a Business. And, it’s not wrong. But there is one aspect which is often neglected by people. It’s that Start-up is less a Business and more a stage, a period to experience.
A Journey where you build every system from scratch. This journey blesses one with so many learnings. That’s the reason any Start-up demands so many efforts by you. So, think of Start-up less as a Business and more as a phase to experience. An inevitable phase.
3. Business Model
It’s the blueprint of your business. A basic system and structure on which your business flows. It describes the core of a business. Like, what are you offering as a product or service?, who are your customers?, what’s your revenue model?, what’s your unique selling proposition (USP), etc.
This is what business model all about. All in all, all the elements which are important to your business are comes under the Business Model. We’ll discuss it in detail later in this guide from an Investor’s point of view.
4. Investor and Funding
Every business requires finance to run its operations. If one doesn’t have money then he/she looks for those who can invest in his/her business. These people who invest are termed as Investors. And, whatever a Business or a person receives is known as Funding. There are various types of investors. Or you can say that there are various sources of funding. Soon I’ll write a Blog and record a Podcast on this.
5. Minimum Viable Product
MVP is the basic version of your product or service you’re offering. It possesses all the key elements of your ideal product or service. For example- If you want to open a restaurant then you don’t require a number of waiters, chairs, tables, chefs, etc. in beginning. You can start with just two sets of dining and work yourself as a chef and serve food. That’s MVP for your restaurant business.
Wondering how you can build MVP for your business then check out the video below:-
6. Pitching
A very exciting term. In fact, a make or break for Businesses. Pitching is where you pitch potential investors for investing in your Start-up. Here you present them with your Business Model and try to influence them with it. You actually convince investors to give you their money by explaining to them what are the benefits for him/her. The crucial thing is here you can’t miss telling investors anything important to your business and at the same time, you can’t reveal anything sensitive. Play it safe.
Further, there are two types of pitch broadly.
i) Live Plan Pitch- It’s a one-page description of your business which reflects everything from a logo to customers to competitors, everything. It can be used to send it to potential investors to convey about your business and hence pitch them. Here is an example of Live Plan Pitch.
ii) Elevator Pitch- This is an exciting pitch. An elevator pitch is a statement that tells the key activities of your business. It’s stretched from 30 secs to 60 secs maximum. It’s an identity of your business and you can use it in Live Plan Pitch as well. Keep it short but effective. Always remember it at the tip of your tongue.
Just to give you a better understanding I have developed an Elevator Pitch for a Company like Amazon below. Let me know how is it.
We connect customers directly with suppliers eliminating middlemen, improving the supply chain, and easing shopping for customers.
What an Investor Looks in a Business?
Okay, so tell me If you’re interested in Mr. Bean and I’ll keep talking about Ben 10 then is it gonna make any sense to you? No, Right. In fact, maybe out of anger you’ll smash my face with a punch.
So, how you can’t expect this from an investor. He/She is also not interested in knowing all the things about your business. And, if you’ll still tell him/her then, guess what. You’re out of the league.
Therefore, pitching requires preparation. It takes time and effort to plan what all things an Investor is interested in listening to and what all not.
This is the point for which this guide was developed. To support you with the things an investor is interested in. I have mentioned some elements in which every investor is definitely interested as follow:-
1. Problem: The Origin of Your Business
Businesses are all about solving problems. They exist simply because there lies an unsolved problem. Tell the Investor what problem you and your team have perceived. Tell them why you think that this thing is a problem even. Explain how this one problem is leading to multiple problems.
Tip- Try to present your problem as a very big problem. No matter in reality how minor or major it is. Use some real-life situations to make an impact.
2. Solution: Your Business Model Plan
This is the real point. After you have explained the problem present your Business Plan as a solution. Describe your whole Business Model explaining Why it’s a Solution?, Who will be benefited? and most important How it’s profitable? Tell the core of your business model.
Tip- Use your Elevator Pitch while explaining the solution to be more effective and get an influence.
3. USP: Unique Selling Proposition
Differentiation is a crucial aspect of anything. USP means what makes you different from others. From your competitor, from other products, from customer utility, etc. Here you tell the investors how you’re going to develop your space in the market.
Tip- Other car washing centers provide an ordinary car wash. But your car washing center offers car washing + discounts to regular customers + miscellaneous free repairing facility + vouchers. So, all these extra benefits are nothing but USP.
4. Potential Target Customers
Customers are the lifeline of every business. Without them, any business can’t survive. Defining your target customer is the next thing you should do for an Investor. It reflects that how better you understand your business and hence your customers.
Tip- Keep in mind that everyone can’t be your customer. Just like for a Barber customers means individuals with hair and not bald people. So, be rational while defining your customers.
5. Market Condition
Next comes the market conditions. Tell the investor what are the present conditions and what could be the future prospects of the market for your product. No matter how good or bad the market scenario seems to tell them the truth. Because an Investor invests less in a Business and more on an Individual.
Tip- Use facts, figures, and graphs in explaining market conditions. It’ll reflect your research.
6. Competitors Existing in the Market
It’s more like punishing yourself. But you have to mention the names of your competitors. Have a deep study of every big competitor. Mention what they are lacking or missing out in their operations. Tell the investors how you have an edge over them.
Tip- Study your competitors well. This will help you to find your USP and to get an early mover advantage.
7. Revenue Model and Cost Structure
Any Investor is most interested in knowing about his/her benefits and investment returns. So, here it is. Tell the investor how exactly your business is going to make money. Mention all the sources of revenue. As cost is inevitable. Explain the cost structure to your investors. What all fixed and variable costs are going to incur. Where your business is going to consume money. Tell investor the future benefits from your business.
Tip- Consider all the major and minor revenues and costs of your business. It’s better to disclose everything related to revenue and cost.
8. Talk about Yourself, Your Team, MVP, etc.
This is what you have to plan. This is where you end your pitch. Here mention whatever you think an investor should know about. Talk about that which you believe can help you get the funds. It could be like you and your team’s spirit or the success of your MVP. Else you can tell what’s driving you to solve this problem. And, what if it gets fail. It’s your call, do whatever you feel like here. Good luck.
Tip- As it’s the end of your pitch try to influence and touch the Investors emotionally. Because emotions are powerful than anything.
So, these are the aspects in which any Investor is actually interested. You can add a few other things depending on your requirement. But don’t miss out on these as they’re very important. And, last but not least keep your pitch within the time frame.
How You Can Design Your Pitch Effectively?
You have understood various important terms. You have understood how to pitch an investor in the best way possible. And, you have also understood what all things an investor is interested in.
I think it’ll be very unfair if I don’t help you with How you can design your pitch.
It’s my responsibility to support you at every point possible. So, lets dive into the guide further. Lets find out the most easy and most effective way of designing your pitch.
As you’ve gone through this guide by far, you need to conceive the fact that raising funds, pitching investors, and running a business is all about being self-aware and calm. It’s more about asking questions to yourself and finding answers to the same.
Therefore, comes the Business Model Canvas.
Business Model Canvas is a template. A magical template instead. It was developed by Alexander Osterwalder in 2005 based on earlier work on the business model. It came with nine blocks but later on experienced some modification. Business Model Canvas is a visual chart that asks the individual to put out his/her business model.
It helps in documenting the whole business plan in a pretty organized manner. Once filled the template a discussion and analysis can be facilitated. This template makes the thing more clear.
Check the below image. That’s how this template looks like.
As I mentioned it’s all about self-awareness, this template questions you about your business and you put out answers. These answers are nothing but your pitch. These answers are nothing but anything in which an investor is interested.
So, this is how you can use Business Model Canvas as a tool to help you in understanding your Business Plan better and hence design an effective Pitch.
You can check this video to understand the Business Model Canvas Fully.
Tips for Pitching
1. Tell a Story while pitching. This increases the interest of the Investor and makes your pitch more effective. You can go for a hypothetical story and characters.
2. Outline your Business Model. Explain your business model very clearly without missing out on any important details.
3. If you have your MVP ready then explain it. It will reflect that you genuinely care about your Start-up.
4. Keep track of your time. Pitching takes place within a short, limited time frame. Don’t lose the track of time.
5. Do tell the investor about yourself and your team. As an Investor invests less in a Business and more in People.
6. Be genuine and honest. No matter if anything is in favor or not.
7. Last but not least reflect your spirit in your pitch, in your words, and most important in yourself.
Final Words
That’s all this guide has to deliver. Now, you know everything required to Pitch Investors and raise funds for your Start-up.
Go and create the template. Go and design your pitch. Go and get investors. Go and get funding.
Go and turn your dreams into reality. Because you only can do that.
All the best and Good Luck!!
